NewLead Files

Filing a Form F-1 just before the close of the New Year, NewLead Holdings Ltd. announced its plans to raise up to $115 million in its first follow-on offering under new management. Proceeds of the offering will be used for funding existing newbuilding commitments, the acquisition of new vessels and general corporate purposes. As part of the offering, the company intends, provided a minimum equity hurdle is exceeded, to exchange the entire current outstanding principal amount of the $125 million of 7% senior unsecured convertible notes due in 2015 for shares based upon the offering price.
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A Look at the Numbers – “You got to know when to hold ‘em, know when to fold ‘em”

By George Weltman

One does not often hear public companies these days speaking about going private. And why should they? In today’s world of limited bank lending, access to capital is paramount, with liquidity a close second. The world has changed immeasurably from the past when public shipping companies worried about the lack of recognition or respect that their shares received, what perhaps could be called the Rodney Dangerfield syndrome.

Years ago, shipping shares were on no one’s radar and China had yet been admitted to the WTO. Other than OSG, TK and NATS among others in the U.S., shipping shares were mainly traded on international exchanges, where shipping held some importance.
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Navios Navy Adds Battleships

Irrepressible, the navy known as Navios last week acquired through its tanker subsidiary, Navios Maritime Acquisition (“Acquisition”), a fleet of seven VLCCs from Fred Cheng’s Shinyo International Group Limited. The aggregate purchase price was $587 million and the acquisition was done as a securities purchase agreement primarily to allow for the assumption of debt. The transaction will be financed with bank debt of $453 million, representing approximately 78% of the purchase price, with cash of $123 million (21%) and through the issuance of $11 million of Acquisition’s shares to the seller. In effect, third parties are funding approximately 80% of the purchase price, a remarkable achievement these days.

The seven vessels to be acquired include six on the water and one newbuilding to be delivered in a year’s time. The fleet has an average age of 8.6 years and a remaining charter term of 8.8 years with an average charter rate of $40,440 net per day. Most importantly, the newbuilding and the recently delivered vessel, the most expensive, are chartered for 15 years. There is also upside with five of the seven charters including profit sharing.
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Markets In Disarray

The equity markets can best be described as volatile, although that characterization may be kind, as they seem to be heading in one direction only. Two companies, Ridgebury Tankers and Navios Maritime Acquisition have braved the onslaught but we suspect would have preferred a better choice of timing. Unlike the preceding IPO offerings, Crude Carriers and Scorpio Tankers, that took place earlier this year, Ridgebury is not the master of its fate. Specifically, its vessels are on option from a third party seller, Teekay, as opposed to an affiliated party, which implies certain time limitations. Despite the switchover from the Gemini to Heidmar pool, they remain on the road for a second week. As a firm believer in no news is good news, we remain hopeful that Bob Burke and his team along with Jefferies will be successful.

Clearly, Ms. Angeliki Frangou leads a charmed life or is an extraordinary negotiator. Despite the uncertain markets and a preliminary vote that was largely against the acquisition of a tanker fleet of 11 product carriers and 2 chemical tankers, shareholders of Navios Maritime Acquisition approved the transaction on Tuesday thereby avoiding the necessity of Navios Maritime Holdings becoming the owner/operator of the tonnage. According to Chris Wetherbee of FBR Capital Markets, the company was able to secure a 60% plus one majority vote from shareholders, but expects Navios’ ownership stake will likely be higher than its 33% target, as it likely purchased shares from dissidents. With three public companies under her purview, Ms. Frangou is approaching Peter G’s record of four. We are in awe of the capacity of these two industry leaders to manage successfully these distinct companies in different sectors with distinctly different shareholders.
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Whither the Banks?

While we, in shipping, focus daily on the macro picture, primarily the world economy and micro data, such as commodity prices, steel production, oil prices, charter rates, etc, in order to gauge what is happening, it may well be that the health of our industry is, for the moment, more directly correlated to the condition of the banking industry, particularly in light of the supply side issue. While the capital markets have filled a void in the availability of capital in the interim, the question remains as to whether the banks will be back and if so when?

In his excellent report, What We Have Learned from the Large Financial’s Results, Paul Miller of FBR Capital Markets provides insights into the earnings and the credit and financial condition of a select group of the largest U.S. banks including Bank of America, JPMorgan, Citigroup and Goldman Sachs based upon their most recent quarterly reports. We believe the results of these company’s are indicative of the general condition of the banking world. His key takeaways are as follows:
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Chris Weyers & Scott Burk – Bankers Move On

We also note the following friends who have found new positions:

Chris Weyers has left Fortis to join FBR Capital Markets as a Managing Director. He can be reached at (212) 457-3314 or cweyers@fbr.com.

Finding life after Bear Stearns, Scott Burk has accepted a position as Lead Ocean Shipping Analyst at Oppenheimer & Co. Scott can be reached at (212) 667-7402 or scott.burk@opco.com.

We wish them all good luck in their new positions.